What happened
Serious volatility continues to hit the crypto market, with a sea of red forming Monday among most large-cap cryptocurrencies. That said, not all tokens are lower. Some altcoins are seeing gains, including Curve DAO Token (CRV -284.25%).
As of 1 p.m. ET, Curve DAO Token had appreciated by 6% over the prior 24 hours on higher-than-average volume. This move followed a recent announcement that Bitfinex would be launching a perpetual contract for Curve DAO Token on its derivatives platform.
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So what
This derivative debuted last week, though it appears to be attracting more attention now. And like similar products, the CRVF0:USTF0 contract offers investors significant amounts of leverage -- up to 100 times, according to recent reports. This may entice traders and speculators, as well as institutional money managers looking to hedge their risk profiles.
Curve DAO Token powers transactions made on the Curve.fi decentralized exchange. Curve.fi, which uses an automated market maker protocol, has become a popular place for investors to trade various Ethereum-based tokens. Investors looking for exposure to this decentralized finance token may be intrigued by the new derivatives offering.
Now what
Increasing attention is being paid to the leverage employed in crypto markets of late. Various derivatives contracts are allowing traders to take on impressive amounts of leverage, which can allow for relatively incredible near-term gains and equally incredible losses. Given the crypto market's tendencies toward sharp short-terms swings, it's understandable that these tools would be attractive to traders looking to take on additional risk.
That said, the risk profile of the crypto market is already extremely high. Derivatives contracts are typically hedging tools utilized by sophisticated investors, and should be treated as such. While the debut of Curve DAO Token derivatives may increase the overall liquidity of this token, it's not a development that retail investors should base investing decisions upon.
